Europe Decisions Don't Open Doors to U.S. Players

The European Court of Justice and the European Commission have issued dramatic statements calling for the end of barriers to Internet gambling. Some observers see these as the beginning of the end for America’s Unlawful Internet Gambling Enforcement Act and the opening of doors to Internet gaming, especially poker.

These developments are certainly much needed good news for publicly traded online poker companies, like PartyGaming. But I believe people are being way too optimistic in believing that changes in the law in Europe, or even direct challenges from Europe, will lead to any relaxing of United States federal prohibitions in the immediate future.

As a dramatic example: The Unlawful Internet Gambling Enforcement Act, or UIGEA, has devastated Internet poker. The UIGEA says that the federal government has to issue regulations requiring your bank to prevent you from wiring your own money to make a bet on the Internet, if that wager violates some federal, state or tribal law. The Democrats tried to prevent those regulations from being made. But in this election year, in a straight, party-line vote, Republicans in Congress recently killed that attempt, issuing public statements about the evils of Internet gambling.

Things are different in Europe. From this side of the Atlantic, it seems that the dispute over Internet gaming is really about how independent the old nations of Europe will be in the new European Union. In the United States, we would call this a fight over "states’ rights."

But the European Union is not the United States. The United States is a nation, a federation with a Constitution. More importantly, it has a Supreme Court that can and will strike down any state law that offends that federal Constitution.

The European Union is only a treaty organization. Yes, a very powerful one. But the European Court of Justice will only declare a member nation’s laws invalid in cases of clear conflict with the laws of the European Communities. Instead, this High Court of Europe usually merely gives guidance and refers cases back to the courts of the nation involved to actually resolve the case.

For years, the Court has consistently declared that a member state can only keep out legal gambling if it can show it is doing so for a high-minded reason, like protecting children and compulsive gamblers, preventing crime and fraud, or protecting local morality. Giving local operators a monopoly to increase profits or tax revenue is not enough.

The Placanica case finally pushed the European Court of Justice too far. Stanley Leisure, the fourth biggest bookmaker operator in the United Kingdom, has more than 200 agencies in Italy -- called data transmission centers -- where bettors can access Stanley’s computers in the United Kingdom. Some of those operators tried to get licensed, but were ignored. Until they were arrested.

The High Court stated that when Italy excluded Stanley from applying, merely because it was a publicly traded company, it violated European Union laws that guarantee freedom to establish businesses and freedom to provide services. The High Court also did not buy the argument that Italy wanted to shrink the opportunities to gamble, considering it announced that it was going to award more than 1,000 new licenses.

The case had an immediate impact far beyond the actual decision. Commentators declared that the case marked the end of all barriers inside Europe to Internet gambling. Word came out of Poland that it would begin licensing online operators.

The European Union Industry Commissioner Guenter Verheugen slapped down Germany when it said the case only applied to Italy.

The most optimistic observers declared that the United States was next.

The problems with this view are many: The United States is not part of the European Union. America does have similar treaty restrictions with the World Trade Organization. But the long-running fight with Antigua shows how little the United States cares about violating W.T.O. rulings.

Most importantly, look who would have to change the American law. Only Congress can amend or revoke the UIGEA. And any bill would have to be signed by President George W. Bush, since Congress would never have enough votes to override his veto.

Can you imagine Mr. Bush signing a bill to bring back Internet gambling that is not regulated or taxed by the United States?

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